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Gogo's (GOGO) Q4 Loss Widens, Revenues Surpass Estimates

Gogo Inc.GOGO reported fourth-quarter 2017 loss of 52 cents per share, which was wider than the Zacks Consensus Estimate of a loss of 48 cents and the year-ago quarter's loss of 34 cents.

However, revenues increased 18% from prior-year quarter to $188 million and also surpassed the Zacks Consensus Estimate of $182 million.

Gogo installed 2Ku service in 227 aircrafts in the fourth quarter, which took the total count for 2017 to 473.

Quarterly Details

During the quarter, Service revenues increased 18% from the year-ago quarter to $164 million. The year-over-year growth was driven by a 10% increase in commercial aircraft online to 3,231, 12% increase in ATG business aircraft online to 4,678, and increased customer usage across all segments.

Equipment revenues increased 13.8% year over year to $24 million.

Segment-wise, Commercial Aviation - North America (CA-NA) revenues increased to $105.1 million, up 4% year on year, primarily on the back of higher aircraft online.

Connectivity take rate increased 36% from the year-ago quarter to 9.9%, increasing average revenue per aircraft (ARPA) to $223,000 in the course of the year. The increase in take rates was driven by the launch of free in-flight messaging on Delta and Alaska Airlines as well as partnership with T-Mobile.

Commercial Aviation - Rest of World (CA-ROW) revenues doubled year over year to $16.9 million and ARPA grew 17% to over $201,000.

Business Aviation (BA) service revenues grew 25% year over year to $45.5 million. Total revenues increased 28% to $66 million, driven by growth in ATG on the back of strong demand for AVANCE platform products.

The in-flight Internet provider incurred net loss of $41.1 million in the quarter, which widened 53% year over year. Adjusted EBITDA increased 8% from the year-ago quarter to $24.9 million.

Gogo reported an operating loss of $14.4 million in fourth-quarter 2017 compared with an operating loss of $2.2 million in the previous-year quarter.

Capital expenditure increased 36.9% year on year to $66 million.

Gogo Inc. Price, Consensus and EPS Surprise

Gogo Inc. Price, Consensus and EPS Surprise | Gogo Inc. Quote

Balance Sheet

As of Dec 31, 2017, Gogo's cash, cash equivalents and short-term investments was $409.2 million compared with $455.8 million as of Dec 31, 2016.

The company's long-term debt was $1 billion compared with $800.7 million at the end of previous year.

Outlook

Gogo expects increase in bandwidth to grow take rates in the second half of 2018. Availability of ATG next generation in 2018 is also a tailwind.

Launch of products like GOGO TV and Gogo Vision Touch in 2017 are also anticipated to gain traction in 2018. With the introduction of AVANCE L5 and L3, Gogo expects to expand its market share in the Business Aviation segment

Per the company's new revenue recognition standard, Accounting Standards Codification (ASC) Topic 606, for 2018, Gogo's revenues are projected to be in the range of $865-$935 million. Under the earlier ASC 605, revenues are expected to be around $750-$790 million (up 7-13% from 2017)

Management forecasts adjusted EBITDA in the range of $75-$100 million.

Gogo projects gross capital expenditures to be in the range of $150 - $170 million. Cash capital expenditure is anticipated in the range of $110 -$130 million, of which approximately 35% is related to airborne cash capital expenditure.

Further, the company anticipates 2Ku installations of 550-650 aircraft, including approximately 300 in CA-ROW.

However, de-installation of American Airlines aircraft will impact the CA-NA segment. The company plans to replace these ATG aircrafts with satellite based ones. The newly installed aircrafts will have lower ARPUs compared with the de-installed ones, which is a headwind.

Zacks Rank & Stocks to Consider

Gogo carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector are NVIDIA Corporation NVDA , Lam Research Corporation LRCX and Paycom Software PAYC , all sporting a Zacks Rank #1 (Strong Buy). You see the complete list of today's Zacks #1 Rank stocks here.

Long-term earnings growth for NVIDIA, Lam Research and Paycom is projected to be 10.3%, 14.9% and 10%, respectively.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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